The manufacturers said the state government had put the parts, which they prominently manufacture for VFJ, under 5 per cent value-added tax (VAT) category as a result of which they could not compete with outsiders.

“Intra-state sales attract 2 per cent central sales tax while inter-state sales of vehicle parts attract 5 per cent VAT. We cannot compete even with manufacturers of the neighbouring states,” said Arun Jain, secretary, Mahakoshal Chambers of Commerce and Industry.

There are 35-40 vehicle parts manufacturers in Jabalpur. These are now facing biggies like Tata and Ashok Leyland vendors.

“The combined turnover of all manufacturer is hardly 20-30 crore. The VFJ manufacture all kinds of four-wheelers for defence and places orders worth crore of rupees but our share has now reduced to 0.1 per cent or less owing to tax disparity,” Jain added.

“The high rate of VAT has pushed us in the red. We have become uncompetitive against outside bidders in VFJ and other ordnance factories. The outside suppliers are issued Form C and thus, it attracts only 2 per cent central sales tax. High rate of VAT on raw material, non-availability of raw material and additional burden of entry tax has put us in loss-making zone,” Ravi Gupta, president of Jabalpur Laghu Udyog Sangh said.

“The manufacturers are also under tight squeeze owing to shrinking orders as Tata and Ashok Leyland vendors have signed a deal with the VFJ to supply parts. The VFJ has discontinued trucks like Shaktiman, Nisan and Jonga jeep and has started making new models like Stallion and LPTA as a result the local manufacturers have few orders. Also they (VFJ) ask the suppliers to get their parts approved by Tata and Ashok Leyland, why will they approve local manufacturers part?,” he added.

The VFJ officials were not available for comments. However, state Finance Minister Raghavji said, “The state government cannot reduce VAT from 5 per cent to 2 per cent as of now but in the future will discuss with VFJ officials so that local manufacturers may get orders.”

VFJ supplies vehicles to the Indian Army and purchases parts and materials under certain norms and specification laid by Central Vigilance Commission.

“The commission had banned post-tender negotiations except with L-1 license holders in 1998,” Gupta said, adding “the state government should reduce VAT and should bring it at par with central sales tax to make us competent in the market”.